Why New Orleans doesn't have Uber

Jeanie Riess on the city's resistance to alternatives to traditional cabs — and what New Orleans taxi services have to say

Just like restaurants and strip clubs, the taxicab industry in New Orleans is bound to the city's seasonal tourist flow. Stumble out of Ms. Mae's in July and a cab is waiting at the door. Stumble out of Ms. Mae's during Mardi Gras and you may be out of luck.

"It depends on the season," says Syed Kazmi, president of United Cabs Inc. "If you're talking about Mardi Gras, not everybody will get the ride. If you're talking about Jazz Festival, not everybody will get the ride. But what about half of the year when half of the cabs are waiting for an hour, two hours, three hours?"

If you can't always get a cab in New Orleans, then why not welcome a free app that lets you hail a car — a very nice car — whenever, wherever, track its progress as it approaches, learn about your driver (and rate him or her after the ride), pay via credit card information stored on your phone and arrive at your destination hassle-free — in many cases for less money than it costs to ride in a taxi?

Uber, the app that connects riders to drivers, is a reality in more than 70 cities around the world, and though some residents are waiting for its expansion into the New Orleans market, it's been met with very real opposition by city officials.

How much opposition? In October, Taxicab Bureau Director Malachi Hull issued a letter banning the app from coordinating any rides. "Notice to Cease Unlawful Transportation Operations in the City of New Orleans," it was titled, accusing Uber of "illegally advertising for drivers, advertising for riders, and/or facilitating for hire and courtesy transportation in the City of New Orleans."

Uber has never given a ride in New Orleans.

"That cease-and-desist letter marked a first for Uber," says Nairi Hourdajian, a spokeswoman for the company, who adds that Uber has never experienced such resistance from any city into which it's thus far attempted to expand. "To receive a cease-and-desist letter from a city in which the service wasn't even available, it's a little confusing to see something like that."

Taxi and limo companies worry about allowing a new player into an already competitive market, especially if it's not subject to the same regulations as the taxicab industry, but fans of the app say transportation should be subject to the rules of a free market defined by consumer choice, not government policing. (Despite numerous requests, the city declined to make Hull available for an interview.)

"The status quo of transportation options in cities prior to Uber had been fairly unchanged for decades," Hourdajian says. "So whenever you're upsetting that status quo, injecting additional competition and consumer choice into the marketplace, those that were benefiting from the status quo tend not to be too pleased about it."

In an interview with Gambit earlier this month, Mayor Mitch Landrieu said he's open to bringing Uber into New Orleans if it can adhere to the regulations of the Taxicab Bureau. "I'm way open, and that's as much as I can say without seeing the regulatory scheme," he says. "Because when you get into regulated industries, something like that could force you to change the entire framework of the governing and that might be a little bit hard to do. And the mechanics of it have to be right before you say yes to something like that."

As for Hull's letter to Uber, Landrieu denied that the city ever threatened a lawsuit against the company, and said that Uber caught the administration in the middle of a fight with the taxi lobby — poor timing for another controversy. "In the middle of that (fight), Uber showed up somewhere and said something, sent them a letter and they asked them the wrong question and my guy said cease-and-desist," said the mayor. "Because we're not sure that you're properly regulated. So that in fact did happen."

United Cabs has been in business in New Orleans for more than 70 years, and Kazmi says the business has been subject to the regulations of the city through thick and thin. Some of the biggest regulation changes came about six months before last year's Super Bowl in New Orleans, when the city required cab companies to install GPS systems, cameras and credit card readers in every operational vehicle. It also put an age limit on cars, to be implemented gradually. In October 2012, the time the new regulations were announced, a taxicab could not be more than 11 years old. Effective January 2013, any new taxi could not be more than five years old, and as of January of this year, all taxicabs had to be no more than seven years old.

Uber's "surge pricing" can result in higher ride prices during busy times, when fares can be as much as eight times higher than normal. Uber CEO Travis Kalanick defended the practice in an interview with The Wall Street Journal last month, saying, "If you're going and buying a hotel room, you know that prices can change. ...
You know that if you buy a flight on the day before Christmas, it's probably 10 times more expensive than two weeks after Christmas. You're OK with that and you understand it. But in ground transportation, there's been fixed pricing for 100 years."

In the 1950s, the city issued about 1,450 Certificate of
Public Necessity and Convenience Numbers (CPNC) — the permit that controls the number of cabs operating in New Orleans. That number is based on the population of the city, Kazmi says.
In March 2013, the city created more CPNCs for the first time — about 100 of them. CPNCs are limited to avoid a flood of loitering cabs in city streets, and they're bought and sold among cab operators at market value. According
to Kazmi, a CPNC used to go for about $60,000. Since the city issued
more of them, they sell
for about $25,000.

The upgrades to the cabs were expensive, and with the decreased value of a CPNC, Kazmi says, a lot of veteran cab drivers quit. "People just walked away from the business because they can't afford it," he says.

In the wake of pricey upgrades, plus the addition of pedicabs to the French Quarter, Kazmi says it's simply unfair to let Uber come in without any regulations and take business away from cabs that have adhered to the city's stringent standards. "We have to comply with too many city regulations and rules," Kazmi says. "How can Uber come and start doing business in a city where we have certain rules and criteria?"

The simple answer is that Uber, which is based in San Francisco (and bankrolled by Goldman Sachs and Google, among others) is not a transportation company; at least it doesn't define itself that way. It's an app. It doesn't employ drivers and it doesn't own any vehicles. Uber was founded less than four years ago, and last week, The New York Times estimated Uber's worth at $4 billion.

"We're the technology company," says Hourdajian. "So we connect the rider with the driver."

The company has four different services at various pricing tiers: One connects riders with existing taxi companies (drivers have an Uber device in their cabs); the second is a kind of ride sharing program; and the third is an SUV service to accommodate a large group or a heap of luggage. But Uber Black, the company's hallmark service, is the one it hopes to bring to New Orleans.

Uber Black essentially turns a high-end ride, such as a limo or a town car, into a cab you can hail on your phone. "We partner with local limo and van companies and drivers, so they're already the professional chauffeurs that cities know," Hourdajian says. That provides a sleek ride for the consumer and a few extra fares for a chauffeur between his or her prearranged pickups. "In between those airport trips and in between the trips that have already been prearranged with their clients, they turn on the Uber app and increase the utilization of their time," she explains. "We really just take the cue from the city and the local jurisdiction and what works for them." (New York City, for example, doesn't allow ride sharing; Los Angeles does.)

While traditional cabs charge a metered fare based on distance and waiting times, Uber rates can vary according to traffic and demand (so-called "surge pricing," which can double or triple the cost of a ride when weather is bad or during a high-demand event like New Year's Eve). More relevant to the New Orleans cab industry is the fact that rates also vary city to city, and Uber has not yet released what it hopes to charge in Louisiana and New Orleans. That's a huge point of contention for the taxi industry. Various cities set their own cab rates, but Uber decides what its own rates are from moment to moment, leaving the consumer to choose whether he or she is willing to pay them.

Monroe Coleman, owner of Coleman Cab Co., says Uber would "take bread off our table." He points out that in addition to different pricing, Uber's cyber presence gives it an unfair advantage getting noticed by drivers.

"When you have another company that's merging in, they are merging in with some of their own clients," Coleman says. "Say you come from New York and you have (Uber) on your phone. When you need transportation, you'll just do the hookup, and I wouldn't have an opportunity because I wouldn't know that you needed transportation."

Uber met with state officials in December and began reaching out to limousine companies to team up for Uber Black. But even limo companies are unsure about the potential partnership.

Chris Bonomolo, a manager at Bonomolo Limousines, says the undisclosed rates are just one reason he's hesitant to give Uber the green light. When Uber pairs up with a limo company, it takes 20 percent of the ride and the company gets the remaining 80 percent. That would be a good deal at a high rate, but if a trip to the airport only costs $20, and the limo company has to expense fuel, a driver's salary, insurance and liability, it's not worth it.

Lyft is a ride sharing service with a whimsical trademark: pink mustaches on its cars. It says it has no plans to enter the New Orleans market.

"There are some cities where the rates are lower than cab rates," Bonomolo says. "There are a lot of things that are going to have to be cleared."

Bonomolo was at the December meeting with Uber and had the chance to express his concerns. He says he's open to working with the tech company, but he wants to see it identify itself as a transportation company. He also wants to see it fall under some regulation, though "it doesn't have to go overboard like they're doing with the cabs now," he says.

Another question Bonomolo has is who's liable in the event of an accident. "The client goes to them, the transaction goes to them," he says of Uber. "And then they dispatch the client and the trip to us. The problem, and the No. 1 issue around the country with everybody, is that they want all the glory but they don't want the risk."

A passenger doesn't necessarily know he or she is riding in, say, a Bonomolo car. He just knows he's riding in an Uber car — until there's an accident, in which case he would sue Bonomolo, not Uber. "So all the issues come on us," Bonomolo says. "We'll get sued, our insurance comes up, while Uber shares no risk or responsibility."

It's a real fear. Last month, an Uber driver hit a family in a crosswalk in San Francisco, killing a young girl and injuring her brother and mother. Last week, the girl's family filed a wrongful-death lawsuit against the driver and Uber. In September 2013, the California Public Utilities Commission created a proposal for companies like Uber that would require them to conduct background checks on all drivers and make drivers carry $1 million-per-incident insurance coverage, among other regulations.

One fear that Bonomolo shares with both Kazmi and Coleman, is an influx of vehicles-for-hire on New Orleans streets. "Uber will not put a limit on how many drivers and vehicles they accept," says Bonomolo. He points out that French Quarter residents won't be happy about that, but his long-term outlook is bleaker. "They add vehicles and drivers based on the need," he says. "If they're succeeding, they're just going to keep adding vehicles and adding drivers.

"From the consumer standpoint, it's a great idea, I love it," Bonomolo says. "But if they just allow Uber to come in here and say, 'Look, he's an Uber driver, he gets a CPNC.' If they're not tough on them like are on the cab industry on how many CPNCs ... there has to be a need. A certificate of public necessity. There has to be a need for it."

Other private transit apps have popped up, but they don't pose nearly as great a threat of being a market-changer as Uber — either because they aren't interested in the New Orleans market or because New Orleans cab companies are, however slowly, adapting to the new technology.

Lyft, a ridesharing company that operates in 19 cities across the United States, connects drivers with riders in a peer-to-peer sharing community. (Lyft cars are visible in cities like Atlanta and Dallas for the giant whimsical pink mustaches drivers attach to the fronts.) Company spokesperson Paige Thelan says Lyft doesn't have plans to launch in New Orleans; when asked why the company's not interested in the New Orleans market, she declined to comment.

HailO is an app that lets you hail a taxi, from any taxi company, from your smartphone — using existing cabs, but effectively cutting out the dispatcher — and was started by a group of former cab drivers. It's the only e-hail app allowed in New York City. According to Don Gilmour, general manager of the Central South region for HailO, the company is excited about launching in the South, and will launch in Atlanta later this spring. But if it comes to New Orleans, the app is less of a threat to cab companies, because it's still a cab for the price of a cab (plus a small fee to HailO for the hookup). Kazmi says United is working on a similar app for its business. So is Coleman.

Rachel Heiligman, executive director for Ride New Orleans, a public transit advocacy group, points out that the tech industry is in the habit of stirring up and disrupting government-regulated services.

"I think we saw it happen with (the apartment rental service) Airbnb, and we're still seeing that happen to a degree. The people can now rent out their homes without going through any sort of city approval process or paying any tax fees to the city," she says. "Uber and Lyft are in the same vein as that. They operate on a more free market mentality. So it creates a challenge for the city, who has worked to try to level the playing field by creating a very transparent set of regulations for taxicabs to operate by."

As for Uber's future in New Orleans, Hourdijian says if consumers want it, they'll need to make noise. "We are excited about New Orleans, and our expansion to New Orleans really depends on the city and the state standing up and saying, 'We want more options for consumers,'" she says.

That relies on New Orleans residents demanding more choice. "What's amazing about the Uber platform," Hourdijan says, "and the choice it injects into a city transportation marketplace is that ... there is a whole host of users, consumers, residents, visitors, drivers and other stakeholders who are ready to stand up and say, 'Wait a second, this is good for our city.' This is good for the economic development of our city. It's good for the economic opportunity for drivers and it's good for users having a safe way to get around.'

An online petition against the city's reluctance to welcome Uber into New Orleans already has 1,000 signatures. Louisiana Public Service Commissioner Eric Skrmetta has also made clear his support for Uber on his Facebook page.

The Uber debate boils down to the oldest economic debate in the book: Is it government's responsibility to protect small businesses like Coleman's who have operated in the city for decades? Or should consumers get to decide what services work best?

It's a question Bonomolo frames well as he considers the effects of Uber on the cab industry. "It won't really hurt our industry as much, in my opinion," he says. "...But from a cab's point of view, all cab drivers, it's their full-time job."

As for what it would do for the city, Heiligman is hesitant to say that adding more cars is the answer to our transportation needs. She points out that the city is investing in a number of alternative transportation projects, from expanding the streetcar line to adding bike lanes and bike racks.

"It's important to make sure that regardless of how people choose
to get around the city, we're supporting them to do so in a safe, convenient way," she says. "The more transportation choice, generally speaking, the better."